New Report Dispenses Myth Of ‘Job Destroying’ Health Law

Republicans in the House successfully passed the “Repealing the Job Destroying Health Care Law Act” — health care repeal — in January, but have always had a hard time explaining how the law destroyed jobs beyond a few well chosen (and poll tested) buzz words. “What we believe is that Obamacare has been a job killer,” House Majority Leader Eric Cantor (R-VA) explained on MSNBC’s ‘Morning Joe’ on January 6th. “If you look at what’s going on in the regulatory arena in this town, the agencies have followed up the passage of that bill by implementing some real job killing regulations.”

This argument never made a whole lot of sense (partly because HHS has gone out of its way to accommodate business concerns and grant them waivers from some requirements) and now a new report from the Urban Institute’s John Holahan and Bowen Garrett concludes that the law will “not have a noticeable effect on net levels of employment” for three reasons:

– First, the overall economic effects of the law are simply too small relative to the overall size of the economy to have much of an effect on employment.

– Second, there are many offsetting effects. The tax provisions in the law will reduce the demand for labor in many sectors and the Medicare cuts by themselves would reduce employment in the health sector, but the expansion of coverage through Medicaid and income-related subsidies in the exchanges would have the opposite effect on spending and employment.

– Third, the new law will not affect most firms, either because they already provide health insurance meeting the new federal standards, or they are exempt from the new requirements (firms with fewer than 50 workers).

It’s worth pointing out that some economists argue that the ACA’s changes the delivery of health care would improve efficiency and productivity, leading to job creation — something this report does not quantify.

Holahan and Garrett do debunk the notion that reform will encourage employers to dump their workers into state-subsidized exchanges, writing: “This is because firms would need to compensate the workers from whom they remove a current benefit, particularly higher income workers, who would lose the valuable tax advantage of ESI,” Holahan and Garrett conclude. “[T]here is little scope for firms being able to save money from dropping ESI [employer sponsored coverage] coverage except perhaps in firms where most workers have low wages as well as low family incomes, and these types of firms are the least likely to offer ESI today.”

This isn’t to say that businesses aren’t anxious about rising health care costs or the impact of the various health care provisions on the bottom line. But thus far, HHS has been quite flexible in how it implements the measure and a growing number of employers are taking advantage of the tax credits and the early retiree benefits. The biggest problem is that many businesses are still confused about the impact of the law, something that’s likely to dissipate as the law is implemented further.